Intel’s Mobile Failure a $17B Mistake, Says New Street Research

Following up on an article late yesterday by Yoav Stoler of Israel’s Calcalist, which claims that Intel (INTC) has lost its business with Apple (AAPL) for versions of the iPhone to come in 2020, New Street Research’s Pierre Ferragu, who is for the most part bullish on Intel, writes today mobile has been a mistake costing at least $17 billion in wasted money the past seven years.

"To us, this confirms the strategic dead-end in which Intel is in mobile,” writes Ferragu.

"It all started back in 2011, with the acquisition of the Wireless division of Infineon. We estimate Intel lost $17bn on a cumulated basis in Mobile, and still loses over $2.5bn per annum."

It’s not a bad thing if Intel were to exit making “baseband" modem chips altogether, he writes, and perhaps the recent departure of Brian Krzanich from the top spot will produce a new leader with “a better ear for our call to exit” that business.

Intel has for the last several years been winning business away from Qualcomm (QCOM), and there has broadly been speculation Intel's parts will win the vast majority of share in the iPhone models expected out this fall, though that is not certain.

Citing Intel internal communications, Stoler relates that Intel managers discussing Apple having told them it won’t use a specific Intel part code-named “Sunny Peak.” Intel had expected Apple to be the main customer by unit volume for the chipset, which was under development, Stoler writes.

Stoler doesn’t say what the reasoning was, though it’s made clear that 5G wireless, the forthcoming speed boost to cellular networks, was a factor in Apple’s consideration.

Intel shares today are up $1.28, or 2.6%, to $50.75, while Qualcomm stock is up $2.05, or 3.7%, to $57.38.

Among wireless names, today’s big winner is Qorvo (QRVO), which doesn’t make modems but rather the other major chip, power amplifiers, and which KeyBanc’s John Vinh thinks has a good shot at increasing its share of chips in this year’s iPhone. Vinh raised his rating this morning on the shares to Overweight from Sector Weight, and assigned a $95 price target.

Qorvo stock is up $4.38, or almost 6%, at $81.82.

Update: Intel later in the day reached out to me to inform me via an emailed statement that its plans for its products, and its customer relationships, are unchanged.

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Intel’s Mobile Failure a $17B Mistake, Says New Street Research

Following up on an article late yesterday by Yoav Stoler of Israel’s Calcalist, which claims that Intel (INTC) has lost its business with Apple (AAPL) for versions of the iPhone to come in 2020, New Street Research’s Pierre Ferragu, who is for the most part bullish on Intel, writes today mobile has been a mistake costing at least $17 billion in wasted money the past seven years.

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